Green Dot’s Bank-as-a-Service Scores Deals with Apple, Intuit

The company announced on its earnings call yesterday that it was powering the newly announced Apple Pay Cash P2P payment service, as well as offering a prepaid card to customers of Intuit’s TurboTax software. Here’s CEO Steve Streit yesterday on the Apple deal:

Today is a special day because with the iOS public beta update released earlier today, you can now use Apple Pay to send and receive money with friends and family. My personal belief is that sending and receiving money with Apple Pay and the associated Apple Pay Cash Card are elegant and beautifully designed experiences, exactly as you would expect from Apple. And I would encourage you to try this service and judge it for yourself.

Streit noted that while Green Dot had spent money on these implementations, both would be immaterial for the rest of the year from a revenue standpoint. Despite the extra spend, Green Dot still posted strong results on the quarter.

The Intuit deal grew out of the company’s TPG tax-processing unit, purchased in 2014. The Intuit deal was taken over from Netspend, which itself took it over from Green Dot back in 2012, so this win is something of a return for the company. Streit called 2012 a time of “misery,” when prepaid competition was fierce and Green Dot faced significant skepticism on Wall Street, but times are better now. Of the intuit program he said, “We expect this program to be in incremental driver of active cards and revenue for our consumer accounts division in Q1 2018, and therefore a future driver of more reloads through our money processing division as those new customers begin using their cards.”

Green Dot began as a prepaid card provider but purchased a one-bank branch in 2011 and uses it as a launching point for specialized services. It also has a deal with Uber to provide accounts for its drivers. Green Dot has its own bank account, GoBank, which received only a passing mention on the call, but serves as the underpinning for the entire bank-as-a-service model.

In response to analyst queries, Streit got into the nut and bolts of how Green Dot’s bank-as-a-service operates. Here he is on two of the platform’s revenue models:

We have some partners who pay us a per-transaction fee for processing services or services provided. You have other partners, Walmart being the most famous because this is public [company,] where there is a rev share that’s negotiated.

He said he couldn’t state the rev share, but it’s known that Walmart drives hard bargains because, well, it’s Walmart. Streit went on to speak about the programs Green Dot can offer:

…the program can be almost anything the sponsor wants it to be, assuming we believe it’s high quality program for consumers and highly compliant and one that we can appropriately manage the risk on, because ultimately we own all that. So we are only interested in working with the best and biggest companies for the most impressive and exciting programs. So the revenue models can be different. That’s different from our product side of the house where we are inventing and creating products that we determine for ourselves fit a particular consumer need and then we market them.

And the benefit of these deals the platform scores is that Green Dot, as a bank, can hold the funds and earn interest, inclduing Apple Pay P2P balances:

Just like on our prepaid cards, any balance that remains on account is an account at Green Dot Bank. And those overnight balances are invested and they are called investable balances, and so we have some return annually.

Green Dot shares rose sharply this morning following the call. Sometimes it’s good to be the bank.

Philip Ryan is Senior Editor of Bank Innovation and Senior Director of INV Fintech. He began covering financial services in 2012 and has more than 15 years' experience in online journalism, which makes him quite old. He can be reached at pryan@royalmedia.com.